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Analysis of Arrest provisions under GST & Can a CA be arrested under CGST Laws?

By6 min read

In the GST regime, the provisions for arrests are introduced to tackle certain situations raised by tax evaders in cases where the person is involved in specified offences for the purposes of arrest and the tax amount involved in such offence is more than the specified limit. Arrest provisions may appear to be very harsh but these are necessary for efficient tax administration and also act as a deterrent and instil a sense of discipline. The provisions for arrests under GST Law have sufficient inbuilt safeguards to ensure that these are not misused and it enacts only for specified offences and only under authorisation from the Commissioner. In this article we have analysed the relevant provision in the light of Can a CA be arrested under CGST Laws

Power of Arrest under Section 69(1) of CGST Act

In this regard, Section 69(1) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) deals with the power of arrest are as under:

“Where the Commissioner has reasons to believe that a person has committed any offence specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) of section 132 which is punishable under clause (i) or (ii) of sub-section (1), or sub-section (2) of the said section, he may, by order, authorise any officer of central tax to arrest such person.”

Specified offences and punishment under section 132 of CGST Act

Further, the provisions of Section 132 of the CGST Act which prescribes the specified offences and punishment is reproduced below:

(1) Whoever commits, or causes to commit and retain the benefits arising out of any of the following offences, namely: –

  1. supplies any goods or services or both without issue of any invoice, in violation of the provisions of this Act or the rules made thereunder, with the intention to evade tax;
  • issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act, or the rules made thereunder leading to wrongful availment or utilisation of input tax credit or refund of tax;
  • avails input tax credit using the invoice or bill referred to in clause (b) or fraudulently avails input tax credit without any invoice or bill;
  • collects any amount as tax but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due;
  • evades tax or fraudulently obtains refund and where such offence is not covered under clauses (a) to (d);
  • falsifies or substitutes financial records or produces fake accounts or documents or furnishes any false information with an intention to evade payment of tax due under this Act;
  • obstructs or prevents any officer in the discharge of his duties under this Act;
  • acquires possession of, or in any way concerns himself in transporting, removing, depositing, keeping, concealing, supplying, or purchasing or in any other manner deals with, any goods which he knows or has reasons to believe are liable to confiscation under this Act or the rules made thereunder;
  1. receives or is in any way concerned with the supply of, or in any other manner deals with any supply of services which he knows or has reasons to believe are in contravention of any provisions of this Act or the rules made thereunder;
  • tampers with or destroys any material evidence or documents;
  • fails to supply any information which he is required to supply under this Act or the rules made thereunder or (unless with a reasonable belief, the burden of proving which shall be upon him, that the information supplied by him is true) supplies false information; or
  • attempts to commit, or abets the commission of any of the offences mentioned in clauses (a) to (k) of this section,

shall be punishable––

  • in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds five hundred lakh rupees, with imprisonment for a term which may extend to five years and with fine;
  • in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds two hundred lakh rupees but does not exceed five hundred lakh rupees, with imprisonment for a term which may extend to three years and with fine;
  • in the case of any other offence where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds one hundred lakh rupees but does not exceed two hundred lakh rupees, with imprisonment for a term which may extend to one year and with fine
  • in cases where he commits or abets the commission of an offence specified in clause (f) or clause (g) or clause (j), he shall be punishable with imprisonment for a term which may extend to six months or with fine or with both.

(2) Where any person convicted of an offence under this section is again convicted of an offence under this section, then, he shall be punishable for the second and for every subsequent offence with imprisonment for a term which may extend to five years and with fine.

(3) The imprisonment referred to in clauses (i), (ii) and (iii) of sub-section (1) and sub-section (2) shall, in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the Court, be for a term not less than six months.

(4) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, (2 of 1974) all offences under this Act, except the offences referred to in sub-section (5) shall be non-cognizable and bailable.

(5) The offences specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) and punishable under clause (i) of that sub-section shall be cognizable and non-bailable.”

Analysis of the Arrest provisions under GST Laws

From a combined reading of the above provisions with Section 69 of the CGST Act, it can be concluded that the power to arrest can only be invoked when the Commissioner has reason to believe on the basis of concrete or credentials evidence or documents and a person has committed the specified offence, however, Section 132 of the CGST Act does not use the term ‘reason to believe’ and it says whoever commits or causes to commit and retains benefit from specified offences.

Thus, for arresting a CA who has simply filed GST return for a professional fee, two conditions must be met for prosecution under Section 132:

  1. Causes to commit, and 2) Retaining benefit

In our view, it cannot be said that the CA has committed an offence and the professional fee cannot be said as retaining the benefit. If Section 69 wanted to arrest such tax professionals, then it should also have used the term ‘causes to commit and retains the benefit of’. Therefore, if the Commissioner wants to arrest such professionals, then he has to establish that he has committed a specified offence and retained benefit which can be only established by the issuance of a show-cause notice and then an order is passed under Section 74 of the CGST Act.

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